The Responsibility of Appointing Managers and the Need for a Demotion System — Managers Who Blame Salaries for Turnover
Read the original article (in Japanese):離職の原因トップ3｢給料が理由｣は意外と少ない ｢部下が離職は給料のせい｣と言う上司の真意 | リーダーシップ・教養・資格・スキル | 東洋経済オンライン
Many managers claim, "Employees leave because salaries are too low." However, according to Japan’s Ministry of Health, Labour and Welfare, the main reasons for turnover are poor working conditions and bad workplace relationships, not salary alone. Managers blaming salary often fail to recognize their own lack of management skills.
The deeper issue is that unqualified managers remain entrenched. In many Japanese companies, once someone is promoted to a managerial position, they are rarely demoted even when persistent turnover or declining team performance is evident. This leads to organizational rigidity and accelerates employee departures.
However, contrary to popular belief, demoting unqualified managers is legally possible under Japanese labor law. The 1998 Sony case clearly demonstrated this:
Clear demotion criteria were outlined in the company's work regulations
A fair evaluation system was properly implemented
The demotion was based on specific, reasonable grounds
This case confirmed that as long as companies follow reasonable procedures, demotion is permissible.
On the other hand, demotions have been ruled illegal in cases where:
The criteria for demotion were unclear
Management decisions were arbitrary
Salary reductions were excessively large
Thus, clear standards and fair implementation are essential for lawful demotion.
Key Points for Designing a Proper Demotion System
① Clearly define demotion criteria in work rules
Set objective indicators such as:
Employee retention rates
Performance evaluations
Incidents of harassment or misconduct
→ Objective criteria prevent arbitrary decisions.
② Avoid extreme salary reductions
Maintain base salaries where possible and limit reductions to managerial allowances.
→ This prevents demotion from being seen as unfair dismissal.
③ Ensure appropriate reassignment after demotion
Provide positive career paths such as:
Specialized professional roles
Training and development roles
Limited-scope managerial positions
→ Demotion should not mark the end of an employee’s career but rather a transition to a better-fitting role.
Risks of Demotion System Abuse and How to Prevent It
A major risk is that demotion systems may be abused as tools to eliminate older employees.
If companies start using competency evaluations to justify age-based dismissals, many experienced workers could be left without support after losing their positions.
To prevent this:
✅ Set purely objective, age-neutral criteria
✅ Offer appropriate reassignments and career support
✅ Maintain accountability for demotion decisions
Conclusion: Institutionalize Competency-Based Demotion While Preventing Corporate Abuse
✅ Tolerating managers who merely blame salary without improving management worsens organizational health.
✅ Unqualified managers must be demoted, but always based on fair, transparent criteria.
✅ The Sony case shows that demotion is legally valid if properly structured.
✅ Preventing corporate misuse through transparent design is crucial.
Only by combining a competency-based demotion system with career support after demotion can Japanese companies revitalize their organizations and secure a sustainable future.
Read in Japanese↓
管理職の任命責任と降格の仕組み——「部下の離職は給料のせい」と言い訳する上司たち（2025.3.4）
Read more articles (in Japanese)↓
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